Asia still focus for Hershey as Q2 income down

By Jane Byrne

- Last updated on GMT

Related tags: Chocolate

Second quarter income for US chocolate maker, Hershey, fell 35 per cent due to factors such as charges related to its supply chain efficiency programme and the joint venture in India but Asia remains a focal area, said the company.

The producer of brands such as Hershey's Kisses and Reese's peanut butter cups earned $46.7m for the three months to the end of 4 July, which was a significant reduction on net income for the same period in 2009 - $71.3m.

But the manufacturer said its net chocolate sales during the quarter increased 5.3 per cent year-over-year to $1.2bn, with it citing increased advertising as well as greater levels of in-store selling, merchandising and programming having resulted in strong marketplace performance.

Hershey CEO Dave West, in a conference call, said that retail sales for Hershey's, Reese's, Hershey's Bliss, Twizzlers and Kit Kat were buoyant.

In terms of growth strategy, Hershey said India is still an important market for the company but explained that while its joint venture, Godrej Hershey, has peformed, the rate of expansion has been “less than initial expectations due to slower realization of development plans and changes in input costs”​ due to the weak trading environment.

And, in a conference call on its financial results, Hershey CEO Dave West said that Asia and Latin America would be focal areas for acquisitions, and while Eastern Europe had some attractive confectionery prospects as well, he said the US company would target regions where it felt it could “add value”.

Hershey said it expects to maintain momentum in the second half of the year, and predicts that full-year 2010 net sales will increase about 7 per cent, including benefit from foreign currency exchange rates.

Last month, the chocolate maker announced cost cutting measures that will trim 500 to 600 jobs from operations.

The company also said it was planning to spend about $300m in modernizing and expanding facilities, with analysts seeing the leaner manufacturing plans as a way of helping Hershey compete in a tougher global competitive environment following Kraft’s recent acquisition of Cadbury.

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